AT&T’s CEO Wants You To Cancel DIRECTV NOW & DIRECTV

Worried couple reading a letter sitting on a couch in the living room at homeDIRECTV NOW and DIRECTV have seen a huge drop in subscribers recently. Just in the 1st quarter of 2019, AT&T lost over 500,000 subscribers and AT&T is happy about that. That is not what I am saying but what AT&T’s CEO & President, Randall Stephenson said during a talk at the J.P. Morgan Conference earlier this week.

“But the other element to give you sustainable profitability is cleaning up the customer base. Because we have a number of customers on our rolls that are very low-ARPU customers (average revenue per user) and we don’t see any line of sight to getting them to a profitable level. And so as these customers’ contracts or whatnot are coming up, there are many who are opting to just leave, and it’s caused churn to spike considerably. These are really low-ARPU customers. And so you’re seeing some spiked churn. And I don’t think you’re going to see that spike mitigate as we go through the course of this year. Second quarter is always seasonally high in terms of churn. But you’re not going to see that mitigate this year. It’s going to take pretty much this year to work through this customer cleanup.” AT&T’s CEO & President, Randall Stephenson during a J.P. Morgan Conference.

From the sounds of it, AT&T wants to focus on highly profitable customers. The low-end customers that buy the cheapest plans possible are not the type of customers AT&T seems to be going after. This is a massive change for AT&T who just one year ago was offering DIRECTV NOW plans for as cheap at $10 a month. Now that is all gone and AT&T wants you gone.

“What’s interesting is the lion’s share of this customer base are high-quality customers. This is a high-quality customer base in general.” AT&T’s CEO Randal Stephenson said. “That customer base is remarkably stable. The churn is over 100% driven by just this cleanup of the customer base. So it’s going to take most of this year to work through that process. We get to 2020, we think these customer numbers can begin to improve significantly. And in fact, we will achieve the EBITDA (Earnings before interest, tax, depreciation and amortization) stability of Entertainment Group this year and feeling really comfortable that we can have stable into 2020 as well”

From the sounds of it, AT&T will continue to push low-profit customers out of its TV services. AT&T seems to be warning investors that the second quarter of 2019 will see a strong drop in subscribers but that it is part of a bigger plan to only go after high profitability customers.

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